By on June 26, 2017

Airbags

The impending bankruptcy of Japanese airbag maker Takata Corp. has been teased at and speculated upon for months. It was never a question of whether the parts supplier would go belly-up after causing the largest automotive recall in history, but how and when.

After furnishing dozens of automakers with airbag inflators what were, in essence, improvised grenades, the multi-million unit recall has left Takata with little recourse. The company has filed for bankruptcy protection in both Japan and the United States, announcing it will sell off the majority of its remaining assets to Key Safety Systems. One of the missing assets will be the equipment relating to the company’s nefarious ammonium nitrate airbag inflators.

The devices, subject to exploding with far too much force and spraying vehicle interiors with metal shrapnel, are responsible for a minimum of 16 deaths, hundreds of injuries, and the ruination of the company. 

Responsible not only for providing a dangerous product but also for doing so while withholding information about defects and manipulating inflator test data, Takata’s goose has been cooked ever since it pleaded guilty to fraud earlier this year. The supplier agreed to a billion-dollar criminal fine as several of its top executives, now unemployed, were indicted by a federal grand jury for criminal wrongdoing.

Takata executives, including CEO Shigehisa Takada, have been extremely apologetic since being caught in the scandal and, according to reports from Automotive News, the Tokyo news conference to announce the bankruptcy was no different. “We spent much time on negotiations, it was extremely difficult to reach an agreement with more than 10 carmakers worldwide and a sponsor candidate company,” Takada explained.

“If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products,” he continued.”In light of the management environment we face, the state of negotiations with the sponsor candidate and carmakers, and the external expert committee’s opinion, we have decided today to file for bankruptcy protection.”

The company is still required to pay almost a billion dollars in restitution. Roughly $850 million is relegated to automakers who were forced into recalls due to Takata’s actions, while another $125 million is reserved for the remaining settlements for individuals injured by airbags.

However, the total global liabilities the supplier has to endure is well into the billions. Tokyo Shoko Research Ltd. claims Takata’s total liabilities for ongoing recalls, penalties, and settlements is likely somewhere in the neighborhood of 1.7 trillion yen. That’s nearly $15 billion.

Key Safety cannot cover that and neither can Takata, even if it dissolves the family-owned holding company controlling it or abandon its stake. “Effectively, it is impossible for the founding family to remain as a big shareholder,” Takada told reporters at the bankruptcy announcement. Takata attorney Nobuaki Kobayashi stated the former Takata entity may be liquidated when operations are handed over to Key and shares could be “processed.”

Affected parties want to be reimbursed, however, and the supplier’s financial woes are of little concern to them. Peter Prieto, court-appointed counsel for the consumer plaintiffs in the Takata liability litigation, released the following statement regarding the bankruptcy filing.

“We do not expect a Takata bankruptcy to have an impact on claims pending against auto manufacturer defendants for their role in the airbag scandal. Settlement agreements with Toyota, Subaru, BMW and Mazda have already received preliminary approval from the MDL Court, and will accelerate the removal of dangerous airbag inflators from 15.8 million vehicles and compensate consumers for economic losses associated with the recall. We will continue fighting for our clients and prosecuting claims against Honda, Ford, Nissan, as well as Takata, to make sure all affected consumers receive the recourse they deserve.”

Automakers also want to be reimbursed for being placed in this situation, yet find themselves unable to get the replacement units they need from Takata, let alone adequate reparations. The recall is so vast that it covers models from several automotive brands that don’t even exist anymore, including Scion, Saab, Saturn, Pontiac, and Mercury. Currently, only 38 percent of the 43 million airbag inflators under recall in the U.S. have been repaired and there are millions more left unfixed globally. Many automakers have turned away from the supplier entirely, seeking help from its competitors to help expedite replacement units.

Key plans on taking ownership at the start of next year. Operations will continue with as much of the current staff as possible while the company refocuses its efforts on non-airbag related equipment.

“The underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished,” Key Safety CEO Jason Luo said in a statement. “We look forward to finalizing definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and long-standing customers while investing in the next phase of growth for the new [Key Safety].”

Takata will persist temporarily as a semi-separate entity to continue the 100-million inflator recall through 2019.

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21 Comments on “End of the Line: Takata, Supplier of Millions of Explosive Airbags, Files for Bankruptcy...”


  • avatar
    George B

    It would be great if supplying replacement air bags had higher priority in the bankruptcy than paying fines and settling lawsuits.

  • avatar
    Oberkanone

    Live by legislation and die by legal system.

    Should airbags have ever been mandated safety equipment? I believe they should be buyers choice. If buyers choose airbags in there purchase decision the marketplace would offer airbags in their products.

    • 0 avatar
      JimZ

      “Live by legislation and die by legal system.”

      yeah, whatever. their problems can’t possibly be because they used a propellant nobody else uses and mishandling said propellant.

    • 0 avatar
      28-Cars-Later

      I don’t recall other airbag mfgs including shrapnel as an added bonus, although I agree in principle airbags should not be mandatory. The issue would then become zero dollars would come off of your sticker price of your airbagless model (not to mention resale issues), so the switch off seems to be the proper compromise.

      • 0 avatar
        jpolicke

        Don’t forget the surcharge your insurance company would apply for not having the safety equipment.

      • 0 avatar
        mbook

        You don’t recall 28-Cars-Later? People have short memories. Airbags have had a troubled history. Congress pushed them onto carmakers originally despite being warned of insufficient testing time. The result was children being decapitated. This happened in a parking lot of a WalMart in rural IN in the 90
        s where I lived at the time. Oops. Ah, but those were defective too you see. Too much explosive force, and for the small and lightweight they’re not to be used at all (hence the switches to turn them off for passenger seats).

        The question is, how defective does an explosive device designed to go off inches from your face need to be before the whole thing is considered a mistake? Oh why were they created in the first place? To protect people that don’t use their seatbelts! Passive restraints, for when you don’t actively do the right thing you silly fools. To a bureaucrat, a multibillion dollar program beats cheap public education radio ads any day.

        And if that isn’t bad enough already, no one is or has ever done unbiased studies to find out if air bags actually save lives. If they did the answers would be sad. See UGA statistics professor Mary C. Meyer’s findings on this. The gullibility of the general public

        “The reason earlier studies have found that airbags save lives is that they used only a special subset of the available data … if we limit the dataset to include only collisions in which a fatality occurred, we get a significantly reduced risk of death due to airbags.”

        https://phys.org/news/2005-06-airbags-probability-death-accidents.html#jCp

        So please, let’s not here the “but these were defective” and they safe more lives than they harm. That’s not likely true, and no one apparently cares anyway.

        • 0 avatar
          sayahh

          Thanks. I care, and I appreciate dissent and opposing viewpoints. Comments and criticism, when taken into account and actually looked into and implemented if effective and improves upon existing design, can and will save lives. Unfortunately, the whistleblowers’ research went unheeded and buried because it would be too expensive to redesign everything, and God forbid the stock prices might drop.

          Just like lithium-ion batteries in your digital camera, laptop and now smartphones, technology improves and everyone does the best they know how. It’s an evolution and you can only learn through experience. You can’t start out making a polished finished product from scratch without first experiencing failures. Airbag do save more likes than they take, but of course just because someone profits from it doesn’t mean that it does or does not work.

          “Congress pushed them onto carmakers originally despite being warned of insufficient testing time.” Perhaps some of the blame could be on the lobbyists? Safety regulation takes forever, so if something happens, I tend to be cynical and follow the money.

          Does it save lives? Or does it only protect ribs and reduce whiplash? (Or maybe it doesn’t do either.) I don’t know, but I’m not buying a car until they come up with something safer than ammonium nitrate and not just an alternative that could end up being potentially worse or possibly deadlier. Lke the replacement to BPA in bottles: are BPA-free bottles safer or more dangerous? But I digress.

          • 0 avatar
            mbook

            >> Perhaps some of the blame could be on the lobbyists? Safety regulation takes forever, so if something happens, I tend to be cynical and follow the money.

            Sure. http://www.nytimes.com/1984/07/11/us/us-set-to-require-air-bags-or-other-restraints-for-cars.html

    • 0 avatar
      sayahh

      Yup, so it’s should be the choice of the consumer whether they live or die, right? Free market or bust? Come on. Are you opposed to laminated windows, too? What if an unscrupulous glass maker made window glass that exploded into shards when you turn on a rock station? Who would be at fault?

      How about oversight and regulate the company that chose profit over safety? Don’t blame regulation, the legal system or free market when you are forced to buy a car that comes with ammonium nitrate inflators that Takata chose instead of the safer inflators filled with other chemicals because of greed and criminal activities (cover-ups, manslaughter (essentially that’s what they did), etc.)

      You can choose to not buckle up. You can choose to pull the airbag out or the fuse out. You don’t get to choose whether the thing will spew shrapnel into your head and body, and that’s not legislation’s fault. Well, maybe it is: it was not strong enough to account for criminal neglect and stupidity.

      They deserve to go under.

      • 0 avatar
        mbook

        >> Yup, so it’s should be the choice of the consumer whether they live or die, right? Free market or bust? Come on. Are you opposed to laminated windows, too? What if an unscrupulous glass maker made window glass that exploded into shards when you turn on a rock station? Who would be at fault?

        You’re presenting an obviously false choice. Like I’ve said, those advocating airbags did so for the simple reason that there use would be *involuntary* on the driver’s part. (It was stated the court requirements could have been satisfied with auto-closing seat belts if they were feasable at the time, which they weren’t.) That airbags would save live was also assumed, quite unwisely.

        It’s hard to avoid the copious accurate reporting of the fifteen year struggle to mandate airbags in cars. The Reagan administration was put in a difficult position by SCOTUS as the NYT piece clearly shows. Once again, if anyone cares. http://www.nytimes.com/1984/07/11/us/us-set-to-require-air-bags-or-other-restraints-for-cars.html

        So not sure why you keep hawking the dangers of big business and downplaying the effect of regulation when in the case of airbags. A mandated safety feature provides no competitive advantage. Mercedes installed them before the mandate because they thought it was an advantage. But now studies are only used when they can perform as bias confirmation. It’s quite sad.

        >> How about oversight and regulate the company that chose profit over safety?

        And who regulates the regulators? Don’t you think they should strive to see if safety devices work as advertised? Airbags have killed people since they came out, and you act like if Takata never existed airbag safety would be assured. Not true.

        >> Don’t blame regulation, the legal system or free market when you are forced to buy a car that comes with ammonium nitrate inflators that Takata chose instead of the safer inflators filled with other chemicals because of greed and criminal activities (cover-ups, manslaughter (essentially that’s what they did), etc.)

        The public was forced to buy a car with a safety device that explodes inches from their faces. Takata was an egregious and criminal violator of public trust, but the simple fact that an explosive safety devices was mandated that can’t be tested in practice ensures that airbags will be problematic. Would you feel better if a millions of airbags were defective if they were made in good faith? You’d be just as dead. There’s no clear reason why that can’t happen. Maybe it has happened. How would we know?

        Am I to understand that you don’t want regulators to be blamed when 70 million defective air bags were installed in vehicles made by more than 14 automakers, that makes a recall necessary so massive it is estimated to take until near 2020 to fix them all? Don’t blame regulators?????? They created the toxic environment ripe for disaster. Using a safety device that explodes and can’t be reliably tested, with the stated justification that didn’t use their seat belts in high enough numbers at the time? Seatbelt technology and testing is so good now and education such that over 90% use them. Put a damn nag beeper when unbuckled in the back seats like in the front seat so even people in the back seat don’t forget. Fine with me. Just don’t don’t put a damn bomb in my face and charge me thousands of dollars, also ensuring older cars not being replaced due to higher costs and aging airbags becoming an even larger threat.

        Ask the military what is the shelf-life of all the explosives they use. They know when to throw them away. What is the shelf-life of the best airbags? Does anyone know? No they don’t. Do they simply become inert in time? Maybe, maybe not. Do you think that would be good or bad? How does that effect buyers of used car? What danger are they in?

        Lockup Takata execs by all means, but don’t think you’ve solved the problematic nature of these dangerous safety devices. I know, I know, we plebes don’t know what’s good for us. The regulators do, but no matter how hard they fail or how badly they screw up Libs will always turn and blame the evil businessmen. Some things never change.

        What responsibilities do regulators have when requiring products that obviously have their own dangers except to experts such as Ralph Nader? None?

  • avatar
    sirwired

    What I can’t figure out is why Takata didn’t declare BK many months ago. It was (or should have been) obvious to everybody involved that Takata was going to be on the hook for $B’s they couldn’t afford, while at the same time any customer with a sane bone in their body was going to be trying to line up a new supplier for these parts and drop Takata as soon as possible.

  • avatar
    Lou_BC

    “improvised grenades” A device designed to explode isn’t “improvised”. The shrapnel aspect was/is poor engineering.

  • avatar
    JohnTaurus

    Were each of those car makers proven to have installed airbags they knew were defective at the time?

    • 0 avatar
      dukeisduke

      That is a good question. In the Takata seat belt recalls in 1995, Honda was hit with a fine, too, because it was shown that they were aware of the defective buckle problem for some time, but failed to notify owners or initiate a recall.

    • 0 avatar
      NormSV650

      Honda has known about this problem for sonebtime.

      https://mobile.nytimes.com/2014/09/12/business/air-bag-flaw-long-known-led-to-recalls.html?_r=0&referer=http://blog.caranddriver.com/honda-taking-heat-for-hiding-deaths-injuries-from-exploding-airbag-recalls/

      • 0 avatar
        sayahh

        I remember reading about the whistleblowers from Takata who took old airbags from older cars and tested them but told to stop or didn’t want to believe in their conclusion or something. Also, Honda’s and Toyota’s own engineers came up with the same conclusion (independently from Takata) but also decided to keep ordering their airbags.

        I think the entire economy is filled with greedy people, if not playing with our lives, then at least gouging up by colluding with others.

  • avatar
    dukeisduke

    Crappy supplier trying to maximize profit, by switching from sodium azide to the cheaper ammonium nitrate, and then making them even cheaper by deleting the desiccant bag. A recipe for disaster.

    Of course this isn’t Takata’s first scandal. In 1995 it was seat belt buckles made out of ABS plastic, that fell apart after a couple years’ exposure to UV rays, causing belts to unbuckle themselves. They tried blaming owners (sloppy Americans eating Big Macs in cars!), but NHTSA’s investigation proved it was the ABS plastic.

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